PIRA Energy Group has commented that global oil prices have come under pressure recently, but physical balances will tighten in 2H12.In the US demand for oil has increased year on year, while demand in Japan has decreased month on month and relative to April 2010.
Key market drivers
PIRA’s analysis has revealed several major market drivers in its look at oil fundamentals:
2H12 physical oil balances tighten. PIRA have noted that oil prices have come under pressure due to concerns about economic growth, continuing fiscal problems in Europe, and soft physical balances. PIRA have said that in 2012, physical balances will tighten significantly, while Central Banks will increasingly take action to maintain economic momentum.
US oil demand is increasing year on year. At the moment, the four week average adjusted oil demand is the strongest it has been since January. Given lower year on year retail prices, US oil demand implies a relatively healthy real GDP growth rate.
In Japan, demand for petroleum products has been as expected. In the two weeks of data released, because of the holidays, it showed higher gasoline demand and lower gasoil demand. As such, gasoline stocks drew and gasoil stocks built. April oil demand was softer relative to March averages, but comparisons to April 2011 figures are distorted by the earthquake and tsunami.
LPG demand is soaring in the US. General market sentiment has clearly shifted with macroeconomic events adding a more bearish tone.
US ethanol manufacturing margins have fallen slightly. The crash manufacturing margin for PIRA’s model US ethanol plant decreased slightly during the week ending May 4th, as corn costs rose but ethanol prices declined. However, ethanol production and inventories increased during the preceding week, as the market remains oversupplied.
Adapted from a press release by Claira Lloyd
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